Coworking, our golden goose?
If you’ve been following along with the Zensors team blog here on Medium, you’ll have noticed that because our design process was inverted, we had to spend significant amounts of time figuring out who our users were even going to be. In this article, we’ll talk about one of the more promising verticals we identified, how it maps to the criteria we set out for evaluating the domains, and how viable it is from a business perspective (will our product provide significant increases in efficiency, cost savings, headcount reduction etc).
Narrowing down
Previously, we identified facilities management as a promising vertical, and have now further narrowed it down to coworking spaces. Based on some initial desk research, coworking spaces have a massive need for data, and it’s a relatively new industry (56% of coworking spaces were created in the last 3 years), which could indicate that the industry is underserved by available technology solutions.
To validate our hypothesis, we started reaching out to coworking spaces across the country, gave them a brief introduction to our technology, and told them we’d like to learn more about what goes into managing a co-working space. Response rates were way beyond the response rates we received in other verticals, which was a first positive indicator. People were happy to talk to us, and out of the 7 or so people that responded, two indicated they’d like to pilot the technology.
WeWork, the co-working poster child
When people think of co-working, they think of WeWork. As an indicator of its growth trajectory, we can report that WeWork expected a profit of $4.2 million from revenue of $74.6 million by the end of 2014. By 2018, the company predicted operating profit of $941.6 million on revenue of $2.86 billion. Although WeWork was by no means the first WeWork was an early innovator in the space through its then unique value proposition to commercial real estate brokers. WeWork aims to negotiate large discounts and deals from landlords by committing to leases of long-time vacant properties for extended periods of time. The idea is that by the time the higher rents kick in, they will have grown their memberships to offset the higher lease. Sixteen out of 19 WeWork leases in New York reviewed by Compstak, a real estate data company, were at least 15 years. This is significantly larger than the average lease of a coworking space at 62 months. In general, the longer the lease, the longer the free rent period that WeWork is able to negotiate. WeWork really benefits from this in two ways: besides the lease, research by DeskMag shows that older spaces typically boast higher membership and profitability, which logically follows from the idea that an established track record and fostered community puts the coworking space in an upwards reputational spiral of attracting more people. The longer a co-working space exists, the higher the probability that it is profitable.
WeWork’s early focus on fostering partnerships with real estate dealers has been paying off, and they have a significant head start in using data science and analytics. Founders and management have frequently dubbed data their secret sauce, leveraging data at scale on all levels of the organization (building spaces, acquiring customers, optimizing spaces, analytics, etc). WeWork’s success in leveraging data to improve coworking has inspired us to explore how high-granularity data, such as that delivered by Zensors, can be used in the same space. In the following article, we’ll be making the business case for Zensors in the coworking domain.
References
https://www.theinformation.com/articles/weworks-gamble-on-growth?shared=c532b5
http://www.hok.com/uploads/2017/11/08/us-coworking-report.pdf
https://www.slideshare.net/AlexanderJarvis/wework-pitch-deck-55170129
